A Competitiveness Analysis of Gujarat Textile cluster

1. GUJARAT TEXTILE CLUSTER
Farming Ginning Spinning Weaving
Textile
Apparels Machinery Institutions Policy
Group
A Cluster Competitiveness Analysis
Anant V Damle | Amit Raizada | Hari Iyer | Nimisha Gupta | Rajas Abhyankar 5

2. AGENDA
Gujarat Region
Textiles Fact Economy Business
Sheet Composition Environment IFC
ગરવી ગુર્જરી
Market Key
Activities Competitive Issues
Cluster
Competing Mapping
Profile Clusters & Description
Competitiveness & Key
Performance Companies Issues

3. REGION – GUJARAT

4. Fact Sheet
Gujarat is the most industrialised state of India with leading
positions in many industries and demographic indicators
GDP GDP Growth Surfaced
Roads GSWAN – India’s Largest
$ 112 10.3 % 96 % operational IP-based
intranet project
billion CAGR of 74,112 k.m.
Literacy Population Premier Edu. Large
Industries
Rate
60
Institutions
60
79 % million 14 800 Special
Economic Zones
Largest Diamond Exporter billion SME Electrified
Industries Villages
8 of 10 diamonds $ 60
are processed in Surat Total FDI
(2002-12)
345 ’000
100%
*Gujarat Industrial Development Board – Jan,2012 1 17

5. Composition Economy fuelled by India’s most industrialised region and
supported by a fast growing primary sector is a recipe for
robust growth
$ 40bn
$ 23bn +
Fastest
Petro
Chem 80
50 %
LUC
Growing
Sector
21% Power-
Clusters
loom
Cash Primary
Crops Chemical
36% Diamond Processing
Secondary
$ 48bn 43%
Services Trade Tertiary
Food Processing
Tourism Ship
Building
Ceramic
2 16

6. Environment The Govt. through policy measures and support is reviving
that heritage which begun with the chance landing of East
India Company’s ship at Surat
Factor Demand Related & Firm Strategy
Conditions Conditions Support & Rivalry
Industries
Natural Ports High domestic Rail & Road
Integrated Mills
demand Network
Literacy Rate
Direct Yarn MSME Textile
Skilled Labour Strong IFCs
Export units
Weather for
Cotton
High buyer Multi-Product Capital Intensive
Entrepreneurial sophistication SEZ Units
Psyche
3 15

7. Diversity of collaborative institutions improves
IFC
competitiveness of the cluster making it tighter
Govt. Of Gujarat
Educational
& Research
NIFT IIM – A
Gujarat
ATIRA University
All India All India Office of
Advisory
Boards
Handloom Powerloom All India Industrial
Board Board Handicraft
Commissioner
Board Graphics
Apparel Cotton Carpet National Textile
Councils
PSU &
Promotion Textile Promotion Corporation
Council Promotion Council
Council Industrial
Extension
Powerloom Bureau
Unions
Trade
Owner
Ginning Mfg. Association
Association
4 14

8. Activities
Govt. attempts to bring back High Value Add activities to
Market
state failed to gain momentum as China floods markets
Largest Export
Fibre
Cotton
destination - ₹40 /kg *
Growing 20% China
Low Entry 33% Lint
Ginning
Lint – ₹100/kg*
Barrier – Highly 65% Seed
Seed – ₹14/kg*
Fragmented 2% Waste
Spinning
Standalone Spread
Consolidated Capital
mills Across States
in past 2 yrs Intensive
dominate Gujarat – 6%
Fabric
Powerloom Concentrated in More Organised
dominated TN & PB Labour Force
*CRISIL Report on Cotton Ginning, May-2012 5 13

9. Competitive
Issues
Country is marred by excessive bureaucracy and
indecisiveness coupled with abeyant economy
Socio-Political
Slow Reforms Less Trade High Import
Liberalisation Duties
Tedious judicial Rank in Ease of
procedures
4 Starting
Legal
Business
Months to
Start Business 132/183
6 12

10. CLUSTER - TEXTILES

11. Heritage and focus on textile is visible through the rapid
Profile
growth of the cluster along with related industries
Kutch Ahmedabad
World Rank SMEs Denim City
GSDP
3 • Denim
• Terry Towels
Textile &
Surat
Synthetic Capital
Contribution Related Clusters Saurashtra
• Cotton Growing
6%
• Jetpur
18 • Manavadar
Umargam
SME
Cotton Employment Technical of India
Production Created Textile Units
35 % 28 % 860 33 %
Mill-made
of India for SSI Fabric 7 11

12. The Generic Value chain shows that there is scope for fully
Profile
integrated as well as MSMEs to operate and create value
8 10
*CRISIL Report on Cotton Yarn Industry, May-2012

13. Profile Most significant cost for fabric manufacturing is the raw
material cost of cotton yarn and high Operating costs due
to high inventory levels
66.9% 7% 7% 12.1%
Material Cost
Labour Cost
Energy Cost
Other Operating
Cost
Net Margin
1.9%
9 9
*CRISIL Report on Cotton Yarn Industry, May-2012

14. Competing
Clusters
Textiles being one of the earliest industries is throughout
India. Primary competition is from A.P & Tamil Nadu
Other Textile
Clusters
Andhra
Karnataka Maharashtra Tamil Nadu
Pradesh
10+
Advantage Gujarat
Electric Incentive Access to
Availability Support Ports
Competition to GJ
Entrepreneurial Psyche Stronger
IFCs
High Low
10 8

15. Mapping Robust core industry is a result of strong supporting and
related industries promoted by the entrepreneurial spirit
of the Gujarati and assisted by the government*
Agri & Related IFC Logistics
Trade Academic
Cotton R&D Unions Institution
Growers
Core Industries Machinery
Silk
Processors Machine
Ginning Extrusion Spinning Mfg.
*Based on discussion with Mr. Charudutt Prayag
Chemicals
Repairs &
Maintenance
Dye
Paints Weaving Dyeing RMG Spares
Mfg.
Petro-
chemicals Support
Other Office of Services
Chemicals iNDEXTb BFSI IC Bodies
11 7

16. Mapping Robust core industry is a result of strong supporting and
related industries promoted by the entrepreneurial spirit
of the Gujarati and assisted by the government*
12 6
*Based on discussion with Mr. Charudutt Prayag

17. Performance
Gujarat and other Industrial States’ growth is coming from
Non-Textile industries unlike Rajasthan, Punjab & M.P
12 6
*Compiled from CMIE database, Accessed 10-Jan-2013

18. Performance
Gujarat has leveraged the advantage of capital intensity in
textile industry triggering capital and human productivity
13 5
*Compiled from Annual Survey of Industries, Govt. of India – 2009, Accessed 10-Jan-2013

19. Companies
World’s best names in industry are born here, others
Key
crowd here – to the most progressive state
Raymond Arvind
Reliance Welspun
Vardhaman Ashima
Garden
Birla Century
Vareli
14 4

20. Issues Multiple SSI units create production bottleneck,
aggravated by weak Supply Chain and impeded composite
mill development
Low Margins Extensive Scope for Labour
Structure Issues
and Capital Change after Vertical Intensive Units
Intensive Units abolition Integration – moved out to
Flourish Quota Regime Large TN and MH
in 2005 Unorganised
SMEs
Higher High Defect
Production Issues
Wages then Rate
neighbours
Labour &
Fragmented Sluggish
Supply Chain Central Govt.
on
Environmental
Others
Clearances
15 3

21. RECOMMENDATIONS

22. Labour intensive jobs of the value chain can be brought
Policy
back with financial sops and a move towards rural mfg.
Support Rural shift to
Composite Apparel mfg.
Mills through will improve
SOPS Labour Costs
Structure
Mandate ISO
Production Issues
and quality
standards to
Labour &
improve
Quality
Promote PPP Create
in empowered
Infrastructure body for
speedy
Others
invenstments

23. THANK YOU